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Dive Into the Details That Move Used Equipment

December 14, 2013
By: Greg Peterson, Machinery Pete
 
 

GregPeterson 2013 1

When it comes to guessing people’s age, I rarely hit the mark—or anywhere close, for that matter. Maybe it’s because I’m a polite Scandinavian. "Gee, sir, I’d guess you’re 65. Am I close? 77! Wow, you look so young."

But point to a piece of used farm equipment in good condition, regardless of make and model (with the excep­tion of cotton equipment), where it’s sold or the type of auction, and I can tell you how old it is with one eye closed. All I have to do is listen to the bidding action. If I hear a lot of "yeps," see as many wrists cocked in the air and the price is climbing so fast I can’t keep up, I know the equipment is 10 years or older. Even $4 corn hasn’t stifled prices for equipment with a little age.

I’ve been watching this trend intensify for the past five to eight years. The phenomenon can be linked to two factors:

  • The high-and-going-higher price of new equipment.
  • Scarcity of good equipment  that’s 10 years or older for sale. Compared with 2000 to 2005, there’s been a 60% drop in the number of machinery auctions.

Ditching the generalities, here’s how equipment values ebb and flow with the calendar, followed by details on smaller and older combines, collector tractors, miscellaneous equipment, large tractors one- to four-years old, 20- to 25-year-old tractors and the Canadian market.

To explore more data, including detailed tables, for each of the machinery categories featured in this article, visit www.FarmJournal.com/machinery_pete

Values Down Second Quarter, Up Fourth Quarter

used value index

 

I’ve been tracking auction prices on all types of used farm equipment for more than 24 years. With each passing year, it’s been interesting to watch old trends hold true and new trends develop. There’s always the "why" behind what’s hot, what’s cold, what’s high and what’s low. Beyond the "why," there’s another significant factor that drives used equipment values: when ... as in the time of year.

Farmers are familiar with the fourth quarter mushroom in used equipment values. The Bush tax cuts in 2002, initially passed to create jobs, dangled a golden carrot for the farm audience. Section 179 of the Internal Revenue Service tax code allows for an immediate income write-off for any business asset purchase (new or used) made during that calendar year.

As a result, auction prices trend upward every November and December. (See Used Value Index at right.) Used values have spiked higher every fourth quarter since 2003.

The flip side is that I’ve seen a dip in used farm equipment values during the second quarter every year since 2005. Chew on that a second … softer auction prices in April, May and June each of the past nine years. It’s probably worth your while to time your equipment purchases a little earlier in the year.

Small Combines With Age

CaseIH2366 IA  118K

This 2002 Case IH 2366 combine with 1,869 engine hours sold for $118,000 at a central Iowa farm auction in late September.


I’m not getting into the "bigger is better" debate. All I know is that while auction prices for larger late-model used combines continue to be "soft" (since the second part of 2010), I’m still seeing strong demand for older, smaller used combines in good condition.

For example, from 1999 through October 2007, I only saw two Case IH 2366s sell for more than $100,000 at auction. Since the commodity price surge in November 2007, a dozen of these combines have broken the $100,000 point.

At a Nov. 2, 2013, farm retirement auction in east-central Iowa, a 2011 John Deere 9570 STS combine with just 188 engine hours sold for $207,000 (no heads), making it the record-high auction sale price I’ve seen on that model.

Want to go really old school? A 1987 Gleaner L3 combine with 3,356 hours and a 20' grain platform sold for $24,000 at a farm auction in north-central Ohio in September 2013.

Collector Tractors

I’ve been watching the wave for original or restored tractors from the mid-1960s through the mid-1970s build momentum the past few years. Disposable dollars in pocket, folks are on the lookout for their favorite tractor or the tractor that grandpa used to teach them how to drive.

If a collector tractor is listed on a sale bill, count on two, three or even five people showing up to bid. Before you know it, the price is going, going, gone. Some of the hottest models that have recently sold include: International Harvester 1206, 1468 and 1568; Oliver 1955 and 2255; and John Deere 6030, 4000, 3020 and 4020.

The best example to highlight this trend occurred at a farm retirement auction in Springville, Iowa, on Nov. 2, 2013. A restored 1972 John Deere 4320 with 7,000 hours sold for a record-high price of $31,250. Auctioneer Andy Hoge told me that despite all of the low-hour, late-model equipment featured at this auction, they fielded the most phone calls on the John Deere 4320.

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FEATURED IN: Farm Journal - Mid-December 2013

 
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